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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Costs that change with the level of output. If output is zero - so are TVCs.






2. Ed = 0 - no response to price change






3. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






4. Two goods are consumer substitutes if they provide essentially the same utility to consumers






5. Entry of new firms shifts the cost curves for all firms downward






6. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.






7. The ability to set the price above the perfectly competitive level






8. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






9. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.






10. A good for which higher income increases demand






11. When firms focus their resources on production of goods for which they have comparative advantage






12. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good






13. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic






14. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






15. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage






16. Exists if a producer can produce more of a good than all other producers






17. Product demand - productivity - prices of other resources - and complementary resources






18. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






19. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






20. Es = (%dQs) / (%dPrice)






21. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it






22. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






23. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






24. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






25. 0 < Ei < 1






26. The total quantity - or total output of a good produced at each quantity of labor employed






27. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power






28. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






29. Entry (or exit) of firms does not shift the cost curves of firms in the industry






30. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






31. The difference between total revenue and total explicit costs






32. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






33. Models where firms are competitive rivals seeking to gain at the expense of their rivals






34. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






35. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received






36. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF






37. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand






38. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






39. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment






40. Demand for a resource like labor is derived from the demand for the goods produced by the resource






41. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption






42. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






43. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






44. The mechanism for combining production resources - with existing technology - into finished goods and services






45. The sum of consumer surplus and producer surplus






46. The additional benefit received from the consumption of the next unit of a good or service






47. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






48. Exists at the point where the quantity supplied equals the quantity demanded






49. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






50. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit